§ 36. Mr. Peter L. Pike (Burnley)What impact there has been on the commissioners' assets arising out of the collapse of (a) hedge funds and (b) other financial institutions. [57280]
§ Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners)I am delighted to say that the commissioners have no investments in hedge funds or any other financial institutions that have collapsed. World stock markets have retreated considerably from the exceptionally high levels of earlier this year. The United Kingdom market, however, which is of most significance 17 to the commissioners, has given up only the advances that we saw earlier in the year, and since the end of September it has started to show greater stability and recovery.
§ Mr. PikeI recognise my hon. Friend's points. Can he assure me that lower stock values have not made it impossible for the Church Commissioners to meet their commitment to provide the Church with funds to meet clergy stipends and pensions?
§ Mr. BellThe commissioners use long-term financial assumptions when assessing their distribution capability and policy. They value their assets on an actuarial basis, rather than using current market values. That system looks to the income generated by investments and the likely growth of that income as the basis for levels of distribution, which helps to smooth the volatility in market values to which the question refers.
§ 37. Sir Sydney Chapman (Chipping Barnet)What impact there has been on the commissioners' assets as a result of the turbulence in the world's financial markets. [57282]
§ Mr. BellThe commissioners' United Kingdom equities comprise a diversified portfolio, which has moved broadly in line with the markets. The commissioners' portfolio continues to out-perform both the index and its benchmark. The commissioners also have significant holdings in commercial, agricultural and residential property. Such diversification of risk has helped to cushion them against any short-term volatility in the stock market.
§ Sir Sydney ChapmanGiven the problems in Japan and the far east and, indeed, the threat of recession nearer to home, will the hon. Gentleman be a little more forthcoming about some of the commissioners' changes to their investment portfolio? Who advises them on changes to their asset allocation strategy?
§ Mr. BellThe commissioners use a range of advisers in making their decisions, including their actuaries Watson Wyatt and property advisers DTZ Debenham Thorpe; the WM company and the Investment Property Databank. During 1997, the commissioners conducted a comprehensive review of their investment and asset allocation strategy which aims to provide stable and long-term support for the Church's ministry. As a result, they are rebalancing their assets in favour of securities—primarily UK securities—while reducing their property exposure. In relation to far eastern equities, the valuation losses have been proportionately minor compared with other institutional funds, due to our relatively low exposure to those areas.
§ Mr. Austin Mitchell (Great Grimsby)We have seen the effect of turbulence on the Church's portfolio, but what has been the effect of Viagra on the Church's financial standing and that of its portfolio?
§ Mr. BellI am happy to say that our investment in the drug company—which fulfils our ethical investment policy to the hilt—has turned over a recent profit of about £3 million in three months.